Typical Audit Findings at PUIs:A Proactive Approach to Avoiding

Negative FindingsDr. Carrie H. Brown

andJennifer Hanlon

Stephen F. Austin State University

• A = Awfully unnecessary• U = Useless paperwork• D = Damning evidence• I = I know nothing• T = Tyrants in charge

• A = Analytical• U = Unbiased• D = Dings• I = Internal accountability• T = Typical

What does “AUDIT” mean ?

Why should we care?• Transparency is the “new black”

- Taxpayers expect accountability for their money- Sponsors expect accountability for their money

• Complex regulations require monitoring• Protect Institution (bad press is bad press)• Paying back a sponsor hurts (fiscally and otherwise)

SettlementsUniversity Amount IssueUniversity of Minnesota $32 million misuse of federal fundsEast Carolina University $1.7 million effort certificationNorthwestern University $5.5 million effort certificationJohns Hopkins University $2.7 million effort certificationUniversity of the District $530,000 false payment claimsof Columbia

Unique Challenges for PUIs• Minimally staffed central office • Handle everything grant related

(emphasis on preaward)• Central offices work directly

with other offices (human resources, accounts payable, etc.)

• More mandates don’t come with more money or people

Use Audits to Help You• Discover weaknesses • Emphasize areas of strength• Test strength of policies and procedures• Test need for new/updated policies and procedures• Strengthen your case to implement policies and

procedures from other institutions’ audits• Train PIs, staff and other institution employees

using lessons from other institutions’ audits

• Internal • Programmatic • Financial• A-133• Pre-award• Desk review

• F & A cost proposal• Compliance (IRB, IACUC)• Whistle blower • Issue specific– Time and effort

certification– Cost transfers

Typical Audit Types

Lifespan of an Audit • Agency contacts institution• Agency holds entrance conference • Institution collects and presents information requested• Agency drafts audit report• Institution responds to draft audit report• Closing meeting to review audit report and responses• Agency issues final audit report • Institution responds to audit • Agency follows-up on institution response

Prepare• Review audits from other institutions• Keep informed of current audit targets• Develop and follow sound policies and

procedures• Regularly review and test your policies

and procedures• Develop an audit response plan• Keep accurate, current and complete

documentation• Create and follow a records retention

policy/procedure

• National Conference on College Cost Accountinghttp://www.costaccounting.org/audits.html

• National Science Foundation http://www.nsf.gov/oig/auditpubs.jsp

• US Department of Education http://www2.ed.gov/about/offices/list/oig/areports.html

Review other Audits

From http://www.costaccounting.org/audits.html

• U.S. Government Accountability Office• Federal Inspector General Sites

http://www.ignet.gov/igs/homepage1.html• Follow each federal agency’s Office of Inspector General

annual work plans– 2012 DHHS work plan included these review areas:

• Cost sharing• Extra service compensation• ARRA awards• Direct charging of administrative and clerical salaries

Keep Informed of Audit Targets

Develop Sound Policies & Procedures• Keep policies general

- What is the rule- Change infrequently

• Clearly designate who monitors• Develop specific procedures

- How to implement the policy- Can change as needed

• Be consistent in policies, procedures and practice• Include other offices in policy/procedure development • Educate staff and faculty on all policies and procedures

Review Policies and Procedures• Pilot new procedures

- Obtain input at all stages - Preview with staff, faculty and other offices

• Review implementation of policy/procedure- Does it work how you expected?

- Does it impact the right audience?• Internal review

- Auditor - General counsel- Human resources

Designate audit liaisonOrganize audit response

teamUnderstand audit

schedule, roles of audit personnel

Identify and assign staff most knowledgeable to data needs

Document data location and availability

Clarify all requestsRespond timely to requestsEnsure that data provided

is accurate, complete, and addresses request

Develop audit response

Have an Audit Response Plan

Documentation: Accurate, Complete, Current• The “paperless office” myth• Show what you did and why• Train everyone - PIs, grant staff,

department staff, pre/post award• Keep hard copy back-up of electronic

documents• Keep phone logs• Follow-up phone calls with written

correspondence• Obtain written sponsor approvals • Electronic documents never die (email

is eternal)

Records Retention / Retirement“The rights of access . . . are not limited to the required retention period but shall last as long as the records are retained.”

• OMB A-110, 215.53(e) Retention and access requirements for records

Thus, if you have a record, it’s Findable. . . Tangible. . . Noticeable. . . Observable. . . Auditable. . .

Records Retention Process• Institution should have system-

wide policy• Grant retention schedules may

extend past institution policy• Clearly identify who keeps what• Define how you determine

retention length• Determine medium to maintain• Maintain records disposition log

What do Auditors do ?

• Truthfully answer all questions asked.• Respond only to questions asked.• Listen carefully to questions before responding.• Ask clarifying questions as needed.• Provide answers IF you have first-hand knowledge

and facts to support your answers.

Interacting with Auditors:The Good

• Never argue. (Auditors are merely number crunchers and don’t know what they are doing, right?)

• Don’t ramble on and on and on. (The more you talk, the less the auditor listens.)

• Don’t get emotionally involved. (Of course the auditor is picking on YOU.)

• Never ever speculate - even if asked. (Nothing is better than making stuff up during an audit!)

Interacting with Auditors:The Bad

Overall Lessons Regularly educate faculty and staff. Develop a positive relationship with your general

counsel and internal auditor. For mental well being, develop your audit response

plan yesterday. Follow policies and procedures. Document when exceptions are made and explain. Don’t put it in writing if you aren’t going to follow. Less is more.

Discussions and Questions

Contact Information:

Dr. Carrie H. Brownbrownch@sfasu.edu

Jennifer Hanlonhanlonjd@sfasu.edu

ORSP - http://www2.sfasu.edu/orsp/